Allocation is the allotment of equity or tokens that may be earned, bought, or reserved for a specific team, group, investor, institution, or another similar entity.
Allocation is a term frequently used with maintaining cryptocurrency portfolios. For example, allotting a set percentage of your portfolio to Bitcoin and a mixture of altcoins would be considered as crypto asset allocation.
In the world of blockchain, to ensure the long-term profitability of a business model, crypto projects must decide the allocation of the token and their budget that usually includes marketing, software development, and operating expenditures. Many blockchain projects also have their very own treasuries and foundations, each of which has its own allocated token. It is also typical for blockchain firms to allocate a particular share of tokens to early team members, with the caveat that they can’t sell them for a specific period. If a team has an organization or a foundation that is responsible for money/funds, it may choose to put money aside for a token treasury, which can be used as the team or community sees fit.
There is an option for investors to receive allocations in multiple rounds of investments. Early investors may benefit from private sale rounds as projects usually allocate a large size of tokens to this sale as a courtesy of their initial investments. Each of these investors in this instance would possess an allocation of the total amount offered in that specific round of sale.
As a reward for their efforts, team members who are working on a certain currency, protocol, or project may receive a specific portion or amount of tokens that will be allocated to the team before the launch of the sale. These allocations could, for instance, be phased out over time as per a set schedule or handed out all at once on a specific day, such as the token generation event (TGE).